I have created few functions in hosted javascript file. I want to call those functions in lookup field events at the client side. Is it possible?
Yes, this is possible.
Make sure that hosted JS files are loaded by client browser. For this, Add a script/html component to reference the hosted file using its token. Or, for this file to be available to all pages, add a script reference to Custom-Sidebar/Header-Footer.
Eg:
<script src="{!#HOSTED_FILE.766952}" />